Q1 2015 Earnings Conference Call (Earnings Release)

SCOTTSDALE, Ariz., May 12, 2015 /PRNewswire/ -- GoDaddy Inc. (NYSE: GDDY), the world's largest technology provider dedicated to small businesses, today reported financial results for the first quarter ended March 31, 2015.

"Our investments in products, technology platform, and customer care are making a real difference for our customers around the world, and our first quarter results demonstrate the benefits of focusing on their needs. Continued strong growth in customers and ARPU drove both our first quarter revenue and EBITDA up nearly 18%," said Blake Irving, GoDaddy chief executive officer.

First Quarter Financial Highlights

• Revenue of $376.3 million, up 17.5% year over year.
• Total Bookings of $498.7 million, up 13.7% year over year.
• Adjusted EBITDA of $93.9 million, up 17.8% year over year.
• Unlevered free cash flow of $85.1 million, an increase of 70.7% year over year.
• Customers were 13.1 million at quarter end, up 9.3% year over year.
• Annual ARPU of $115, up 9.6% year over year.

First Quarter Operating Highlights

• Domains revenue of $199.2 million, up 10.4% year over year.
• Hosting and Presence revenue of $140.2 million, up 21.2% year over year.
• Business Applications revenue of $36.9 million, up 53.3% year over year.
• International revenue of $95.9 million, up 23.4% year over year.
• GoDaddy priced the initial public offering of 23 million shares of its Class A common stock at $20 per share and began trading on the New York Stock Exchange on April 1 under the symbol "GDDY." The underwriters of the offering subsequently exercised an over-allotment option to purchase an additional 3 million shares.
• GoDaddy launched GoDaddy Email Marketing (GEM), building on its 2014 acquisition of Mad Mimi, to provide customers with simple and effective email marketing.
• In April, GoDaddy acquired the domain name portfolio business of Marchex, including approximately 200,000 domain names, to increase inventory and liquidity in the domain secondary market.
• Last week, GoDaddy launched GoDaddy Pro into general availability, providing web designers and developers with a new suite of products and support to help them build and manage websites for their clients.

Balance Sheet

At March 31, 2015, total cash and cash equivalents and short-term investments were $197.9 million, total long-term debt, including current portion, was $1,418.0 million, gross debt was $1,466.8 million and net debt was $1,268.9 million. Assuming the completion of our initial public offering and the use of proceeds from such offering occurred on March 31, 2015, total cash and cash equivalents and short-term investments would have been $234.3 million and net debt would have been $850.5 million.

Business Outlook

For the second quarter ending June 30, 2015, the Company expects revenues in the range of $390 - $395 million and adjusted EBITDA in the range of $75 - $78 million.

For the full year ending December 31, 2015, the Company expects revenues in the range of $1,595 - $1,605 million and adjusted EBITDA in the range of $322 - $327 million.

Initial Public Offering

On April 7, 2015, GoDaddy Inc. successfully closed its initial public offering (IPO) of 26 million shares of Class A common stock at a public offering price of $20 per share, which included 3 million shares sold pursuant to the underwriters' over-allotment option and 2.5 million shares sold to certain affiliates. GoDaddy received $491.8 million in proceeds, net of underwriting discounts and commissions, from the IPO.

Presentation

This press release presents historical results, for the periods presented, of Desert Newco, LLC, the predecessor of GoDaddy Inc. for financial reporting purposes. The financial results of GoDaddy Inc. have not been included in this press release as it is a newly incorporated entity and had not engaged in any business or other activities during the periods presented. Accordingly, these historical results do not purport to reflect what the results of operations of GoDaddy Inc. would have been had the IPO and related transactions occurred prior to such periods. For example, these historical results do not reflect the attribution of net income to non-controlling interests or the provision for corporate income taxes on the income attributable to GoDaddy Inc. that GoDaddy expects to recognize in future periods.

Quarterly Conference Call and Webcast

GoDaddy will host a conference call and webcast to discuss first quarter 2015 results at 5:00 p.m. Eastern Time on May 12, 2015. The webcast, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, will be available through the Company's Investor Relations website at www.GDDY.com. Following the call, a recorded replay of the webcast will be available on the website.

GoDaddy Inc. uses its Investor Relations website at www.GDDY.com as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor the Company's Investor Relations website, in addition to following press releases, Securities and Exchange Commission (SEC) filings, public conference calls and webcasts.

Forward-Looking Statements

This press release contains forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on estimates and information available to us at the time of this press release and are not guarantees of future performance. Statements in this release involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking statements, including, but not limited to: any projections of product or service availability, technology developments, customer growth, addressable market size or other future events; any statements about historical results that may suggest future trends for our business; any statements regarding our plans, strategies or objectives with respect to future operations; any statements regarding future economic conditions; and any statements of assumptions underlying any of the foregoing.

Actual results could differ materially from our current expectations as a result of many factors, including, but not limited to: the unpredictable nature of our rapidly evolving market; fluctuations in our financial and operating results; our rate of growth; interruptions or delays in our service or our web hosting; breaches of our security measures; the impact of any previous or future acquisitions; our ability to continue to release, and gain customer acceptance of, our existing and future products and services; our ability to manage our growth; our ability to hire, retain and motivate employees; the effects of competition; technological, regulatory and legal developments; intellectual property litigation; and developments in the economy, financial markets and credit markets.

Additional risks and uncertainties that could affect GoDaddy's financial results are included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's prospectus dated March 31, 2015, filed with the SEC on April 1, 2015, which is available on the Company's website at www.GDDY.com and on the SEC's website at www.sec.gov. Additional information will also be set forth in other filings that the Company makes with the SEC from time to time. All forward-looking statements in this press release are based on information available to the Company as of the date hereof, and GoDaddy does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles in the United States (GAAP), this press release includes financial measures defined as "non-GAAP financial measures" by the SEC including Bookings, Adjusted EBITDA, Unlevered Free Cash Flow, Average Revenue Per User (ARPU) and Net Debt. These measures may be different from non-GAAP financial measures used by other companies in our industry, as those other companies may calculate their non-GAAP financial measures differently, particularly related to adjustments for acquisition accounting and non-recurring expenses.

We believe that these non-GAAP financial measures are useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. The non-GAAP financial measures included in this release should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation between each non-GAAP financial measure and its nearest GAAP equivalent is included in this release following the financial statements. We use both GAAP and non-GAAP measures to evaluate and manage our operations.

Total Bookings. Total bookings represents gross cash receipts from the sale of products to customers in a given period before giving effect to certain adjustments, primarily net refunds granted in the period. Total bookings provides valuable insight into the sales of our products and the performance of our business since we typically collect payment at the time of sale and recognize revenue ratably over the term of our customer contracts. We report total bookings without giving effect to refunds granted in the period because refunds often occur in periods different from the period of sale for reasons unrelated to the marketing efforts leading to the initial sale. Accordingly, by excluding net refunds, we believe total bookings reflects the effectiveness of our sales efforts in a given period.

Adjusted EBITDA. Adjusted EBITDA is a measure of our performance that aligns our bookings and operating expenditures, and is the primary metric management uses to evaluate the profitability of our business. We calculate adjusted EBITDA as net loss excluding depreciation and amortization, interest expense (net), provision (benefit) for income taxes and adjustments to the TRA liability, equity-based compensation expense, change in deferred revenue, change in prepaid and accrued registry costs, acquisition and sponsor-related costs and a non-recurring reserve for sales taxes. As a result of our business model, we typically collect payment at the time of sale and generally recognize revenue ratably over the term of our customer contracts. At the time of a domain sale, we also incur the obligation for the domain name registry fees associated with the customer contract. As a result, sales to customers increase our deferred revenue and prepaid and accrued registry costs. We therefore adjust net loss for changes in deferred revenue and changes in the associated prepaid and accrued registry costs to facilitate a better comparison of our performance from period to period.

Unlevered Free Cash Flow. Unlevered free cash flow is a measure of our performance used by management to evaluate our business prior to the impact of our capital structure and after purchases of property and equipment, such as data center and infrastructure investments, that can be used by us for strategic opportunities and strengthening our balance sheet. However, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.

ARPU. We calculate ARPU as total revenue during the preceding 12-month period divided by the average of the number of total customers at the beginning and end of the period. ARPU provides insight into our ability to sell additional products to customers, though the impact to date has been muted due to our continued growth in total customers. The impact of purchase accounting adjustments makes comparisons of ARPU among historical periods less meaningful; however, in future periods, as the effects of purchase accounting decrease, ARPU will become a more meaningful metric.

Net Debt. We define net debt as gross debt less cash and cash equivalents and short-term investments. Gross debt consists of the current portion of long-term debt plus long-term debt and unamortized original issue discounts on long-term debt. We believe the presentation of net debt provides useful information to investors because our management reviews net debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage. Furthermore, certain analysts and debt rating agencies monitor our net debt as part of their assessments of our business.

About GoDaddy

GoDaddy's mission is to radically shift the global economy toward small businesses by empowering people to easily start, confidently grow and successfully run their own ventures. With approximately 13 million customers worldwide and more than 59 million domain names under management, GoDaddy gives small business owners the tools to name their idea, build a beautiful online presence, attract customers and manage their business. To learn more about the Company, visit www.GoDaddy.com.

Reconciliation of Non-GAAP Financial Measures

The following tables reconcile the most directly comparable GAAP financial measure to each of these non-GAAP financial measures.

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Source: GoDaddy Inc.

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